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Pollution in a globalized world: Are debt transfers among countries a solution?

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  • Marion Davin
  • Mouez Fodha
  • Thomas Seegmuller

Abstract

We analyze the effects of a debt relief, that is, a decrease in public debt of a low‐income country financed by a high‐income country, on environmental quality. Under perfect mobility of assets, the debt relief increases the overall capital stock, and environmental quality when public abatements are sufficiently efficient. Welfare in both countries can also improve. Under a weak mobility of assets, capital does no more increase in the richest country, but environmental quality can improve. This comes from a crowding‐out effect of debt in the high‐income country, which does no more take place when the mobility of assets is significant.

Suggested Citation

  • Marion Davin & Mouez Fodha & Thomas Seegmuller, 2023. "Pollution in a globalized world: Are debt transfers among countries a solution?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 21-38, March.
    • Handle: RePEc:bla:ijethy:v:19:y:2023:i:1:p:21-38
    DOI: 10.1111/ijet.12333
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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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